U.S. Rep. John Moolenaar (R-MI) and U.S. Sen. Marco Rubio (R-FL) introduced legislation in Congress that seeks to prevent the U.S. tax code from rewarding investments in Communist China.
Many Wall Street financial firms choose to invest in China, and this, said the lawmakers, doesn’t benefit the American economy, and threatens U.S. national security. However, the U.S. tax code rewards these investments with a generously low capital gains tax rate.
Their bill, the Patriotic Investment Act, would encourage divestment from Chinese securities by removing the beneficial capital gains tax rate for these investments. Instead, Chinese investments would be taxed at the highest income rate.
“For too long, Americans investing in China’s military-industrial complex have been given unfair tax breaks that allow them to profit from funding our adversary. That’s wrong and Senator Rubio and I are introducing this legislation to put a stop to this special treatment. Our nation’s tax code should be incentivizing investment in the United States, not collaboration with the CCP,” Moolenaar, chair of the House Select Committee on the Chinese Communist Party, said.
The increased rate would only apply to financial gains that accrue in the future, not to gains that have already accrued. Companies and individuals would have six months to divest after passage of the Patriotic Investment Act, and they would be given the ability to spread tax payments over three years.
“The Capital gains tax rate was meant to encourage investment in American innovation, not fund an oppressive communist regime, but Wall Street continues to give money to our adversaries and reap rewards from the American tax system. Enough is enough. My Patriotic Investment Act will level the playing field and ensure that our tax code no longer encourages investments that undercut American businesses and workers,” Rubio said.